Michael Saylor, the CEO of MicroStrategy, believes Ethereum is a security because of its changeability. He said a commodity’s characteristics cannot be changed and nor can it have an issuer. Saylor pointed out that gold cannot be changed to steel or aluminum based on a vote. But Ethereum’s initial coin offering (ICO), management team, and hard forks highlight that it can be fundamentally changed.
Senator Cynthia Lummis’s bill The Responsible Financial Innovation Act says any digital token with sufficient decentralization should be considered a commodity and fall under the purview of the Commodities and Futures Trading Commission (CFTC), rather than the Securities Exchange Commission (SEC).
Saylor argues that changing the code in a way that fundamentally alters the value or issuance pattern of the currency means that the coin or token passes the Howey Test, and is subjected to securities law. Todd Phillips, director of financial regulation at the Center for American Progress agrees with the MicroStrategy boss. He believes most cryptocurrencies are securities. As such, they need to comply with customary securities laws. Phillips pointed out that the Responsible Financial Innovation Act bill doesn’t impose adequate disclosure rules important to potential investors.
Gary Gensler, SEC chairman, on multiple occasions, has said that cryptocurrencies are securities. The SEC has been tough on crypto companies offering yield products without registering as a securities provider. Saylor condemned crypto companies for providing unregistered securities. He said the management of such companies lacks a registration statement.
Saylor regards Bitcoin differently as there was no initial coin offering and no one wants to change the network’s software. Developers and investors are relying on Bitcoin network’s proof-of-stake consensus mechanism. They don’t feel the need to keep upgrading the software. Bitcoin is a commodity.
